What Can India Learn From Global Peers On Regulating The iGaming Industry?

The iGaming industry, encompassing online gambling, gaming, and betting, has grown significantly in India and globally. According to the Indian Gaming Report, 2024 this growth is measurable not only in terms of revenues but also through the rising number of gamers (~455 Mn in 2023), 1400 gaming companies, 500 gaming studios and increased job opportunities within the gaming landscape.

Around the world, governments are pacing to regulate this burgeoning sector to balance industry growth and responsible gaming. The rapid rise of the online gaming industry has pushed jurisdictions to provide a robust regulatory framework to address dynamic challenges within the sector. 

Comprehensive regulations could address challenges such as the safety and security of the users, bring the unorganised entities within the regulatory ambit and distinguish between games of skill and chance, especially for taxation purposes.

Even in India, the rapid rise of online gaming and the multiplicity of such platforms has prompted policymakers in New Delhi to streamline this sunrise sector. However, the regulation of online gaming, gambling, and betting within the country is still in its nascent stages. 

Formulating An Approach To Regulating iGaming

To develop a coherent regulatory framework for India, it is essential to examine the regulatory approaches of other countries, particularly those with comparable diversity, political systems and user base. For example, the United States (US).

The US has been one of the pioneers in regulating the rise of iGaming. Moreover, the US has opted for a model of governance wherein both the federal and the state governments find a role in effectively regulating both fantasy sports and sports betting, which is quite similar to the Indian model. 

The key legislation in the US, the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006, distinctly separates fantasy sports from gambling or betting. Under this law, fantasy sports are classified as a “game of skil”’, excluding them from federal gambling laws. 

While federal law classifies fantasy sports as an activity distinct from “betting” or “wagering”, states in the US still have the final say regarding the operability of these games within their respective territorial limits. Furthermore, in 2018, the US Supreme Court overturned the federal ban on sports betting, allowing state governments to set their own policies on the matter. 

The US’ regulatory approach has significantly boosted revenues for the federal and state governments. For instance, in the first ten months of 2022, legal sports betting in the US generated $73 Bn in wagers, resulting in $1.3 Bn in federal revenue. 

This contrasts sharply with India’s estimated $150 Bn illegal betting market in 2016, suggesting a substantial potential revenue loss for the Indian government. 

Thus, this indicates that the regularisation of the unorganised and emerging markets as well as providing licences for sports betting platforms has further increased accountability and transparency in governing this industry.

Drawing from Other Countries

With the wave of iGaming gripping the entire world, it would also bode well to look at some other significant legislations from around the world.

Nations such as Germany, Denmark, Australia, Netherlands, Curacao and Ireland have put in place licensing regimes for fantasy sports and sports betting platforms, both domestic and offshore.

Moreover, Germany, the Netherlands and Australia have also established specific parameters to distinguish games of skill such as fantasy sports or sports betting from purely chance-based games. 

However, both Curacao and Denmark have not particularly differentiated between various forms of betting as these countries issue single licences for all types of online gambling services.

Learnings For India 

In India, the regulation of ‘betting and gambling’ falls primarily under the jurisdiction of individual states, as designated by the State List in the Indian Constitution. This has resulted in a fragmented regulatory landscape with considerable variations across states. Numerous states still depend on the outdated Public Gambling Act of 1867, which fails to adequately address the complexities of contemporary online gaming and betting.

The rapid growth of iGaming in India, driven by the proliferation of smartphones and affordable internet, has further complicated the regulatory landscape. The core issue revolves around whether prediction sports should be classified as a “game of skill” or a “game of chance’”.

To address this, the US model offers a potential blueprint for India, considering similarities in scope and legislative application. By adopting a system that integrates federal and state governance, India can:

• Improve the ease of doing business in the igaming sector.
• Increase government revenue.
• Mitigate malicious betting activities.

Incorporating successful elements from regulations globally could further enhance the regulatory framework, ensuring a balanced approach to fantasy sports and sports betting regulation. A few of these are mentioned below:

• Enabling A Centralised Framework With State Autonomy:

1. 1. • Similar to the US, India can implement a centralised regulatory framework that sets broad guidelines and standards for online gaming and betting. States can then adapt these regulations to their specific contexts. This approach ensures uniformity while respecting regional differences.
        

• Licensing Regime:

1. 1. • Establish a comprehensive licensing regime for online gaming and betting operators. The regime should include clear criteria for distinguishing between “games of skill” and “games of chance”. This can be drawn from Germany’s Interstate Treaty on Gambling and Denmark’s Gambling Act.
        

• Prediction Sports As Games Of Skill:

1. 1. • Following the US model, fantasy sports and prediction sports should be explicitly classified as “Games of Skill”, exempting them from traditional gambling regulations. This classification should be based on rigorous criteria, ensuring that the outcomes are predominantly determined by skill rather than chance. 

• Collaboration With Sports Governing Bodies:

1. 1. • Similar to Australia’s model, iGaming platforms should be required to establish agreements with sports governing bodies. This ensures transparency and integrity in sports betting and fantasy sports.
        

• Consumer Protection & Responsible Gaming:

1. 1. • Implement robust consumer protection measures, including self-exclusion options, deposit limits, and mandatory age verification. The regulatory framework should also promote responsible gaming practices.
        

• Revenue Generation and Taxation:

1. 1. • Legalising and regulating online gaming and betting can generate significant revenue for the government. Drawing from the US experience, a well-regulated market can shift significant amounts of revenue from illegal to legal channels.
        

• Technology and Innovation:

1. 1. • Encourage innovation in the iGaming industry by providing clear guidelines on the use of technology, including blockchain and artificial intelligence, to enhance transparency and security.
        

• Public Awareness and Education:

1. • Launch public awareness campaigns to educate consumers about the legal status of various gaming activities, the risks involved, and available protections.

Conclusion

The iGaming industry presents a significant opportunity for economic growth and revenue generation in India. However, the fragmented and outdated regulatory framework needs an overhaul to address the challenges and harness the potential of this industry. 

By drawing from successful regulatory models in other countries, India can develop a comprehensive and coherent framework that balances consumer protection, industry growth, and regional diversity. This approach will not only enhance the legitimacy of the iGaming industry but also ensure that it operates within a well-regulated and transparent environment.